Strategy Advantages

Fully developed cost of an ERC MHR community should approximate 60% to 70% of the cost of a conventionally built single family home community
Direct material and labor costs lower as they are factory-built
Land allotment is approximately 1/3 less than what is needed in conventionally built homes

ERC estimates MHR home prices at approximately $160,000 per home, with similar square footage for a conventionally built home in close proximity at $250,000 or more

Cost control highly enhanced given developer’s elimination of numerous trades including floor-slabs, wall construction, drywall, paint, internal plumbing, internal electrical, internal HVAC, paint, flooring, roofing and more
- Allows for tighter pre-purchasing and higher level of fixed of costs

Horizontal” nature of land development and construction (underground, paving, and landscaping only), makes sites available sooner
- Homes can be moved into the community faster, and in groups
- Homes are made available for rent sooner

ERC anticipates that most homes will have lease contracts in-place prior to being transported to the community
- Once homes are set up, rent collection can immediately commence
- ERC projects 100% occupancy of its developments that are 100 units or smaller within 12 months

ERC’s MHR communities will be developed outside of core urban areas where higher and better uses of land are more likely, resulting in lower land costs and faster entitlement processes

According to surveys, monthly rent savings of $1,000 is worth as much as 15 to 20 minutes of additional commute to renters
- ERC will seek entitlement of land that is “a bit further out” and not in competition for higher zoning uses
- The ERC development team will ensure that proper zoning and entitlements can be achieved before acquiring land for new development

The KEY to the ERC MHR platform strategy is to address the strongest and broadest market demand

Focus on extensive need for separate family living in 3-bedroom / 2-bathroom homes approximating 1,400 square feet
Homes that are affordable for entry-level families
- Of particular concern in the in-migration states of the Southeast, where single-family home prices and rental levels are increasing materially
- Approximate $1,000 / month savings afforded in ERC’s MHR communities allow for a broader, deeper market of potential renters

Product Overview

Cost: Average cost per home estimated at ~$65,000; all-in development cost of ~$160,000

Home Build: Prioritization on structural integrity over amenities
- Features such as hard-surfaced floors (no carpets), wider exterior walls (2” X 6” vs 2” X 4”), senior grade insulation, full FEMA-code storm protection, etc.
- Optional features such as track lighting, recessed lighting and crown- molding are considered but will be de-prioritized in favor of the above items listed based upon the need for cost control

Financial Viability: Despite acute demand for building materials given the ongoing development surge in the in-migration states, ERC believes it can achieve attractive returns
- Demand driving up the cost of manufactured homes…
- …However each $5,000 of increased home cost = only ~$31 of required rent to maintain yield – current rent comparables support these rent levels
Tax Advantage: Shorter depreciation life of manufactured homes
Quality & Maintenance: Overall structural strength of modern-day manufactured homes on par with conventionally built homes
- Maintenance standards will be rigorous in ERC’s MHR communities, with full internal inspections of each home monthly
- Homes closely monitored on an ongoing basis
- Many manufactured homes are 30 and 40+ years old, proving their sustainability. All ERC MHR homes will be brand new, with an advantageous combination of allowable depreciable life and practical longevity

ERC will continue to expand its deal- sourcing channels to access new development opportunities, leveraging its relationships across local market constituents including national and local brokerage firms
ERC will combine its research-focused approach with both targeted and opportunistic sourcing to develop within markets that fit the criteria for the MHR product
ERC anticipates that additional team members will be added to development, asset management, property management and finance as the pipeline and community portfolio grows
In-house asset and property management will be leveraged initially, bolstered by local property management, with ERC selecting best-in-class local managers
Develop Zephyrhills and additional near-term pipeline
Quickly scale pipeline with additional capital infusion
As ERC completes near-term developments and continues to build the pipeline, additional senior and junior staff to be brought in-house
ERC’s local market presence medium to long-term will depend on where it can quickly build scale
ERC will pursue markets that meet its target criteria, provide compelling economic and scaling opportunities based on robust, data-driven research and offer attractive opportunities to acquire land that fits the MHR strategy

ERC seeks to develop numerous MHR communities, targeting a run-rate of 3,000 homes per year in the next 3+ years
Developed MHR communities are expected to produce attractive cash flow on an ongoing basis as well as benefit from value appreciation
ERC anticipates up to 5 – 7 year average hold periods for the developed portfolio
- ERC will remain flexible and opportunistic in terms of monetization strategies to maximize overall returns and multiple on invested capital
ERC anticipates that multiple exit opportunities will exist for the portfolio as SFR becomes an increasingly popular and sought-after asset sector
- Sector has already become the focus of institutional capital and public REITs who have made significant investments into the asset class
- Substantial capital continues to be allocated to SFR and will need to be deployed in scale over the next several years; buyers will seek portfolio acquisitions to quickly gain scale